Fiscal and Monetary Policy - 946 Words

It is the role of the federal government therefore to keep inflation low as well as keeping unemployment rate down. Philips curve gives the probability of having both a low unemployment and inflation hence providing the stakeholders in the sector in the short run a tradeoff between unemployment and inflation (Mark Asmaa, 2012). Unemployment can be kept under control by the government while at the same time allowing inflation OR to keep controlling prices and not controlling unemployment. This compromise between the two is shown as a contra-relation between inflation and unemployment. In the long run, the government can only afford to play around with inflation while having zero control over unemployment. At this natural rate of unemployment the curve will be vertical. According to what we are given, the rate of inflation is at an acceptable level of 2 % while unemployment rate is exceptionally high. The only way to counter this is by reducing the tax rates and increasing the government expenditure on both services and goods which is an expansionary policy. The reason for this policy is to first raise the budget deficit. For consumption and spending not to drop the fed can choose to increase the money supply to keep it high. The common tools for expansionary monetary policy are the open market purchase of securities and lowering of the FED landing rate. Because of increased availability of money the aggregate supply will not keep up with rise in demand hence leading toShow MoreRelatedMonetary And Fiscal Policy : Monetary Policy1435 Words   |  6 PagesMonetary and fiscal policy Introduction Fiscal policy is defined as the power that the federal government poses that enables it to impose taxes and also spend to achieve its goals in the economy. On the other hand, the monetary policy is maintaining the programs that try to increase the nation’s level of business through regulation the supply of money and credit. Currently, one of the most important roles of the federal government is to regulate and also ensure that there is stability in the economyRead MoreFiscal Policy and Monetary Policy781 Words   |  3 PagesFiscal policy is the governments spending policies, which influences the conditions economy as a whole. With this policy, regulators can improve unemployment rates; stabilize business cycles, control inflation, and interest rates to control the economy. The government adjusts the spending and tax rates to influence the nation’s economy. The idea is to find the balance between public spending and changing tax rates, by increasing or lowering taxes m ay cause the risk of causing inflation to rise. IfRead MoreFiscal Policy And Monetary Policy1735 Words   |  7 Pageswhich is fiscal and monetary policy to find out a way to find the economic. It is macroeconomic policy that pursues to enlarge the money supply to boost economic growth or combat inflation. One of the form is fiscal policy of expansionary policy, which comes in the method of tax cuts, discounts and increased government spending. Expansionary policies do come from central banks, which focus on cumulative the money supply in the economy. Now let look at the break down of expansionary policy which dealRead MoreMonetary Policy And Fiscal Policy1178 Words   |  5 Pagescrisis. Monetary policy and fiscal policy are two tools by which government uses to guide the economy. Sometimes the economy is challenged with both inflation and unemployment at high rates. Macroeconomics breaks down the entire economy and the issues affecting it, including inflation, unemployment, econ omic growth, and monetary and fiscal policy. A country has to come up with good macroeconomic policies in order to better their economy. This paper will discuss the government s policies adopt toRead MoreFiscal and Monetary Policy610 Words   |  3 PagesFiscal and Monetary Policy Governments can use both fiscal and monetary policies to move the economy from a recessionary or expansionary gap. Fiscal policies include increased or decreased government spending, increased or decreased taxation; on the other hand monetary policies include increased or decreased money supply, changes in interest rate, etc. One of the tools of fiscal policy is government spending, the initial equilibrium is represented by the point E. With increased government spendingRead MoreFiscal Policy And Monetary Policy1753 Words   |  8 PagesThe government in times of economic recession has responsibility to take action, engaging in expansionary economic policies is the action my paper will discuss. The types of economic expansion include Fiscal Policy, and Monetary Policy, the expansion of the two policies allows the government to adjust taxes, and government spending. Harry Truman once quoted â€Å"It’s a recession when your neighbor loses his job: it’s a depression when you lose yours.† (The economy perspective, the banker s banker. (1998Read MoreFiscal and Monetary Policies893 Words   |  4 PagesFiscal and Monetary Policies Charles T. Sheridan Student ID: 4290575 ECON 102 American Military University Dr. John Theodore Economies everywhere in the world have fluctuations, there Gross Domestic Product (GDP) is either growing (economic boom) or it is not producing enough and falls into a recession. In a recession, an economy’s GDP suffers two consecutive quarters of negative growth. Personal consumption, government spending and the amount a country imports and exports measure GDPRead MoreMonetary Policy And Fiscal Policy850 Words   |  4 PagesThe Federal Government uses the monetary policy and fiscal policy to establish and determine the best way to manage the economy. Monetary policy is used by the Federal Reserve to manage the money supply. This includes credit, cash, check, and money market mutual funds, with loans, bonds, and mortgages being the most important. This policy can be broken into two categories: monetary restraint and monetary expansion. As it states, one is trying to restrain the market while the other expresses expandingRead MoreFiscal Policy And Monetary Policy862 Word s   |  4 PagesFiscal Policy vs Monetary Policy Fiscal policy is a way for the government to control the economy financially. The Federal Government sometimes partakes in actions to stimulate the economy. Fiscal Policy focuses on changing government spending, controlling inflation, encouraging economic growth, and to reach full employment. Monetary policy is a policy the Federal Reserve Board enforces which consists of changes in the money supply which influences the interest rates in the economy. This can helpRead MoreFiscal and Monetary Policy3460 Words   |  14 Pagesassistant manager for Skanska I have been asked by my manager to explain how fiscal and monetary policy decisions affect the business in which I work. To undertake this task I will provide explanation of the fiscal and monetary policies. I will also explain what interest rate is and what could be possible changes on it. Additionally, I will explain how both policies could make changes in employment level. Fiscal policy Economic climate is essential to be controlled within every single county because